Delaware Supreme Court mulls appeal of forced company sale

DOVER — The Delaware Supreme Court is considering a challenge to the court-ordered sale of a successful New York-based translation company after a judge concluded the relationship between the company’s two co-founders and sole directors had devolved into “complete dysfunction.”

The justices heard arguments Wednesday regarding a judge’s 2015 ruling ordering the sale of TransPerfect Global Inc., a leading provider of translation, website localization, and other services with offices in more than 90 cities worldwide.

The judge concluded that feuding co-founders Philip Shawe and Elizabeth Elting, his former fiancee, were hopelessly deadlocked over management of the privately held business they started in a college dorm room.

Shawe challenged the ruling, saying the judge abused his discretion, exceeded his authority, and should have considered less drastic alternatives before granting Elting’s petition for a custodian to oversee a sale.

TransPerfect employees have waged a public relations campaign challenging the authority of Delaware judges and seeking to overturn the ruling, which has also been criticized by former New York Mayor Rudy Giuliani.

Following the sale ruling, Chancellor Andre Bouchard ordered Shawe to pay Elting $7.1 million in fees and expenses as sanctions for his “deplorable behavior,” including intentionally trying to destroy information, failing to safeguard evidence, and repeatedly lying under oath.

David Goldstein, an attorney for Philip Shawe, called Bouchard’s sale ruling both unprecedented and improper, saying it disturbs “settled expectations of Delaware law.”

“The court’s requirement that Shawe offer his shares for sale was explicitly devised as a means to provide Ms. Elting with a windfall, a windfall to which she had no legal right,” Goldstein argued, immediately drawing the ire of Chief Justice Leo Strine Jr.

“The court said no such thing,” Strine retorted.

Strine, who preceded Bouchard as chief judge on Delaware’s well-respected Court of Chancery, also noted that before issuing his ruling, Bouchard urged Elting and Shawe to try to resolve their rancorous differences in a final mediation effort.

“Given the other well-reasoned findings of the chancellor, how could we ever upset his discretion that these two people cannot reasonably be expected to work together?” Strine asked.

Strine also engaged in testy exchanges with Harvard University professor Alan Dershowitz, who argued on behalf of Shawe’s mother. Shirley Shawe owns 1 percent of TransPerfect but is aligned with her son, who owns 49 percent. Elting owns 50 percent.

Dershowitz suggested that Bouchard’s ruling amounts to an unconstitutional “taking” of private property without a public interest by forcing Shirley Shawe to transfer her interest in TransPerfect to third parties. That argument was not made in the Chancery Court, and would thus typically not be allowed to be made on appeal under Delaware Supreme Court rules.

Strine also noted Shirley Shawe’s attorneys stated in their briefs that she never challenged Chancery Court’s power to order a dissolution of a corporation or liquidation of a corporation’s assets.

“Only if it’s bankrupt,” Dershowitz tried to explain Wednesday. “That’s certainly what the intent was. We don’t believe you can order the liquidation.”

Attorney Philip Kaufman, representing Elting, argued that the only way to save TransPerfect and the jobs of its 4,000 employees is to sell it.

“Unless that happens, this company is going to continue along the poisonous course that it’s been traveling for the last number of years,” he said.

Randall Chase writes for the Associated Press

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